Thursday, September 12, 2013

Apple iPhone 5S and 5C Australian prices a disappointment.

Apple's release of their new iPhones was very predictable and is exactly what was expected. Whilst there was some hype about an iPhone 6, I suspect this may have been deliberate PR. In any case, in a post a few weeks ago I predicted only the 5S and 5C would be released. What was unexpected to me was the price manipulation and the dropping of the Apple iPhone 5. Didn't see that coming.

Normally the lead Apple iPhone (16GB) has typically sold for around the $800 mark in Australia. The 16GB iPhone 5 sold for $799. However the new lead phone has now jumped in price to $869. This is an interesting method to increase profit and is regularly done by companies. Increase the price and those who continue to buy the product increase profit more than those who stop using the product. Microsoft is doing the same with their licensing fees. Once a company has you hooked they can increase prices.

Apple quite to my surprise was very aggressive with their iPad price when they released it. Apple was always known for their premium price and the iPad, a fairly unique product, came out at excellent prices well below the Mac Air range. Microsoft on the other hand priced their tablets above the typical notebook price and the perceived value in their products wasn't there. The market voted with their wallet and we saw the massive write-off by Microsoft.

To see Apple release the 5S with a jump in price is a real shame.

The next surprise was the 5C which was being promoted as the low cost model to compete in the lower cost segment. All Apple seem to have done is drop the price a little to $739 so there appears to be a large enough price gap between the 5S and the 5C. As a status symbol the 5C is going to be a hard sell. Who wants to be embarrassed for buying the cheaper model. What you couldn't afford the 5S! That's the problem when people buy for status over the functionality they really desire.

The unlocked version of the Apple 5S is $649 in the States. Convert for the current exchange rate, add GST and the price should be around $764. Yep about right for an easy sell at $799, but for Australians we're being slugged nearly $100 more.

What's also with the dropping of the iPhone 5? Shouldn't that have been their third option rather than the 4S. It is after all one year old technology. I suspect the problem for Apple is the iPhone 5 was probably too close to the 5S when loaded with iOS 7 and thus selling the 5C would make almost no sense. All of this feels far too much like trying to manipulate customers perception rather than focusing on bringing to market products customers want to buy. What I'd would have expected to see is the 5S at $799, the 5 at $679-$699 and the 5C in the $499-$549 price area, perhaps also keeping the 4S and dropping the price to perhaps $399, it is after all, quite an old phone in the fast moving mobile market.

What we now see is the iPhone 4 has gone (was $429), the iPhone 5 (was $799) has gone, the 5S is more expensive at $869 and the 5C is really not a good low cost option at $739. It all feels to me like Apple have moved the overall pricing up across the board and thinks no one will notice.

Overall I think Apple have done themselves a disservice. They appear to be using the marketing tactic to extract larger margins from their customer base rather than being cutting edge on the products and pricing. A premium of $100 for being in Australia doesn't really cut it when many of their products can be shipped direct from China.

Those who love Apple will happily pay the premium. Those who are sitting on the fence will most likely seriously consider Samsung or perhaps a more cost effective mobile. I know one person who is over Apple's cumbersome iTunes approach and looking seriously at a Samsung Galaxy S4 and another at a refurbished Apple iPhone 4. Premium prices in what is now a mature market and far from the excitement past, is not going to help Apple compete against Samsung. As I read that back I thought, funny isn't it. Apple has to compete against Samsung. It used to be Samsung had to compete against Apple. How things change.